Organon & Co. (OGN) Earnings Call Transcript & Summary

Good morning, and welcome to the Organon session of Cowen's 42nd Annual Healthcare Conference. We're very pleased to have with us the top management of Organon, one of the most unique and exciting and emerging companies in the biopharma space. So we're very pleased to have you with us at our conference. Representing the company is Kevin Ali, who is the CEO; Matthew Walsh, who is the CFO; Sandra Milligan, who is the Head of R&D; and Jen Halchak, who is the Head of Investor Relations.

So with that, I'd like just to dive right into the Q&A. We'll centermost of the companies on the women's health area -- most of the questions on the women's health area, but we may sprinkle in a few others as well. So let's start out with your most important product, that being NEXPLANON. Q4 for NEXPLANON was the highest quarter ever in terms of sales. Can you walk us through why this level was seen? And what is the likely driver or can it persist into the future at a level somewhat like this?

Well, I'll start with the second part of the question and then come back to the first, which is kind of you need to kind of understand the background. But -- so absolutely, we believe that we're on a new track of sorts and that we will reach heights that we reached in the fourth quarter of last year. But it was a building process. In spite of the fact that we did have a pandemic, we've been pretty much, for the last 2 quarters in 2021, our sales force was able to go back in clinics, was able to speak to our customer base. The second thing, from a tactical nature is, physicians need to be certified in order to be able to insert and remove NEXPLANON. And we had record quarters for the last 2 quarters of the number of physicians both interested as for first time, as well as other healthcare professionals, could be at nurses, PAs and others, interested in getting certification. And those actually that hadn't been certified for some years wanted to get recertified. So there's a tremendous interest that was starting in terms of the certification. And that's kind of a proxy for us for people really interested in NEXPLANON as a long-acting reversible contraceptive. The third thing is we started to get the benefits from the DTC campaign we started in the summer. And ultimately, that followed through with a social media campaign using the same type of celebrity spokesperson that we have, who really kind of went out on all major social media channels. So started to get a lot of kind of pull of patients coming in and asking for NEXPLANON. So all of that pulled together, in addition to kind of our activities and what we're trying to do to really start to revamp this product, spoke to the purpose and the promise of Organon, meaning that NEXPLANON is a fantastic product, with still some ways ahead of it in terms of patent protection, but just wasn't taken care of to the extent that it needed to be in the U.S., rather with Merck. And so Ultimately, in our set of hands with the kind of attention we're putting on it in the U.S., I've just described some of the activities, but also ex-U.S., where we saw a lot of growth in the fourth quarter, where there was nothing being done for NEXPLANON. And now, just anything that you started to instill there is really starting to have a tremendous impact. And as a result, we went from 75% U.S., 25% ex-U.S. to now, 2/3 U.S., 1/3 ex-U.S., and I think it will probably stabilize around 65-35 type of contribution over time. So we expect the ex-U.S. business to grow faster. But overall, it's just that attention is the strategic nature of what we're doing from a senior management perspective.

Great. So we'd like to stick on the contraceptive topic for a minute and I'll just digress and say that top management of Organon very graciously participated in the call with us late last year, where we had an impartial academic OB/GYN who participated in that call as well and there was a bit of a debate back and forth about the future and opportunities within women's health. And one of those areas was contraceptive products. So there were 3 things that, that KOL mentioned on that call that all seem to be things that OB/GYNs were looking for, for the treatment of their patients. So I'd like just to go through this list and maybe, you could tell us the latest thinking on Organon's part relative to each. So the first was the non-estrogen progestin-containing oral contraceptive. So how does Organon view this? And what is your strategy in this regard?

Well, the contraception market is fairly satisfied from the perspective that we -- obviously, we have a combination of both estrogen-progestin, progestin-only and really, progestin-only products, we do have one called Cerazette are really for women who really can't tolerate estrogen-containing products. We have an opportunity to continue to expand our footprint in NEXPLANON as well as other things that we're doing in the space. But right now, where I see the future, honestly, it is a movement away from some of the progestin-only containing products or combinations into more of the long-acting reversible contraceptives and sometimes, even short-acting reversible contraceptives. I think that when you look at overall the worldwide rate of unintended pregnancies, let's take the U.S., it's north of 40%. It has been so for the last decade or even more. And that is the fact that there was something else that kind of was very interesting in the statistic is that of the 40% unintended pregnancy rate, about 40% of those women were actually on contraceptives. And most of that was oral contraceptive. So you kind of see that there is a persistent compliance issue. There are a number of other issues in terms of kind of the lack of flexibility, lack of compliance sometimes and the lack of overall efficacy sometimes, with oral contraception that can be solved with more long-term solutions like NEXPLANON or even short-term reversible contraceptive. So we do have one in the space in the progestin-only. We do find ourselves as a kind of a company that wants to make a broad offering to -- because that's what characterizes the field. The field is really filled with women that have different choices, what works for them in their life and their lifestyle. And so it is a very -- one of the interesting forms of contraception out there.

Okay. So let's stick with some of those innovations. You mentioned implants and the importance and value of those. So what is Organon doing relative to innovation in implants, but also, in rings? What's on the horizon that we can look forward to?

Well, look, in terms of -- we've been at this since June of last year where we spun out. And in that period of time, we've done a lot of interesting business development, 4 deals actually so far, to really expand our footprint in other areas beyond contraception. But let me just spend a minute on your question in regards to what are we doing more with the long-term or short-term solutions. Look, NEXPLANON has patent protection until 2027, with the opportunity to get marketing exclusivity for an indication -- for 5-year indication, we expect that indication to be forthcoming probably in the 2024, 2025 range. So that would essentially take us to a 2028, 2029 time frame in terms of overall patent protection on our product. And that's essentially, one of the key areas of life cycle management with our long-acting reversible contraceptive. Now, I will tell you, though, we are in deep discussions with a number of different companies that offer up various forms of either nonhormonal contraceptive methods or potentially progestin-only, reins, a number of other things that we're looking at in order to be able to bring solutions in the space, in the contraceptive space, which we still feel that there's quite a bit of unmet demand in terms of what's available out there.

Just curious, how can current rings be improved upon?

Well, there are -- current rings can be -- when you're talking about rings, we have one ring called NuvaRing, which lost exclusivity in 2018 in the U.S., but only really started to see competitors, generic competitors in the 2020 time frame. It continues to be a major option out there for short-acting reversible contraceptives. When you look at rings and you look at rods like NEXPLANON, you look at rings, these are interesting delivery devices. The active substance within the ring and within the rod itself is not anything earth-shattering in terms of pure innovation, but the device, combined with the active substance actually makes it a very interesting unique proposition. And so where I see ring technology going in the future, more potentially for contraception, maybe, less frequent administrations, maybe longer time horizons where you might be able to use the ring for a longer period of time or leave it. You have other indications that you could get out of rings. And I think there's ongoing discussion and research in the space, the same thing with rod technology as well. These are 2 very unique ways of being able to deliver a drug for a variety of indications, of which only contraception has really been researched up to date this far many more things that we can do.

Okay. Let's move to fertility. So today, in 2022, what is the biggest unmet need in fertility? And does that vary geographically? And where does Organon see the greatest near-term opportunity to fill this unmet need?

Well, first of all, as a statement in regards to where fertility is going, I think when you see some of the commentaries made by various governments around the world, whether it's China, they made an announcement about the 3 child policy, but it really didn't move the needle in terms of the overall birth rate over the last period of time. So now, they're looking at maybe, other options, potentially some reimbursement in different spaces and different areas. I know that in the government of Beijing, that area, they're starting to look potentially at reimbursement for IVF therapy. So when you start to make it easier for couples to be able to get IVF therapies, then you'll start to see more movement of being able to get more traction for the IVF fertility. But you see in Europe, in France, a number of other countries that they've started to expand the number of types of patients that potentially they would reimburse, you see in the U.S., more company-sponsored support of IVF coverage and insurance coverage. So you start to see much lower tailwinds that this opportunity is for real. And there's only really 3 players in the space. And we happen to actually have a fairly good market share in this space, but there are still significant unmet needs. First, really, there needs to be research in oral medications rather than all injectables. Second, we do have 1 injectable, ELONVA that we want to launch ultimately in the U.S. and China, our 2 biggest markets, which gives you an opportunity to have less injections, 1 injection every month, which is a convenience for patients, because it kind of avoids that multi-injection kind of phase. Three, I think price. Cost is sometimes a major barrier, especially in markets where a lot of it is out of pocket. So that will also be something we're working on. Better success rates, overall, still as you see IVF therapies are gaining in overall success rates. But then, relatively stable over the last 5 to 10 years. I think that people are looking for better success rates as well. And there's a lot of digital innovation in this space. A lot of artificial intelligence in the space to try to better understand who would probably be a great potential patient for a successful intervention for IVF. A lot of areas are really emerging in the space, and we are in a good position to really take advantage of some of this -- some of these tailwinds.

And what is success rate for these therapies in a place like the U.S. today?

So for IVF therapies -- I mean, Sandy, our Head of R&D, can probably comment on exactly what the most recent efficacy level is. But I'm hesitant to say, but I think it's somewhere in the 60% range. Sandy, can you correct me if I'm way off that mark?

Unfortunately, I think it's even lower than that, Kevin. There are so many different variables that go into what is a successful IVF treatment. So that really is the goal of any IVF fertility treatment is to improve that success rate. And so whether that's improving the environment in which implantation takes place, the uterus and see -- I know there's all sorts of research going on right now in biome or different methodologies to assess that uterine environment, as well as the actual -- the quality of the OO-sites that are going to be implanted. So there's the hormonal piece that, as we know, the IVF physicians, the fertility physicians basically -- I hate to say hijack, that within pathophysiology or physiology in order to make that -- the receptivity for induction and ovulation and implantation ready. And then, of course, we have the uterine environment and we have the health of the OO-site as it is. So I think there's 3 areas of technology that can be improved to increase the chance of success.

And I could see very clearly the value of having an oral therapy, especially in a diverse place like China. So how close is Organon to having an oral therapy? Do you have one, for instance, that you have in-house now? Or are you looking at some from the BD perspective? Is that something which could be reality relatively soon?

Well, we're focusing on BD right now, in terms of our overall opportunities to bring things into our pipeline. But you asked what would really be an area of great unmet need out there that could potentially satisfy the market, definitely oral. Less interventions in terms of injections, more convenient in terms of cost and the other digital things, suites that surround it in order to be able to gain more traction on success rates.

Okay. So let's move on to another area. What is the unmet -- first of all, what is the standard of care today in preterm labor?

Sandy, do you want to touch that -- approach that?

Yes. Sure. So I'd like to separate first the prevention of preterm labor from the treatment of preterm labor. So the prevention of preterm labor has different optionality, including surgical or procedural interventions like cerclages and also, some existing medications that are used to help prevent preterm labor. Where we are looking at right now with one of our new acquisitions or licenses rather with ebopiprant from ObsEva is the treatment of preterm labor. So that is the term labor. And right now, there is no approved standard of care. There are many medications that are used off-label, but they don't have the clinical data sets to actually really demonstrate whether or not they have utility or not. Oftentimes, tocolytics are involved and also, some magnesium sulfate and other medications that are helped -- that are used to help basically ripen the baby, if you will, ripen the fetus for that early delivery. So it's really an area of unmet medical need at this point.

And are we correct in saying that we're awaiting Phase II data? And if that's the case, when will we see?

Yes. So there is a small Phase IIa study that was delivered from ObsEva mostly, and there was a couple of European countries, some other smaller countries, has a small data set. What's unique about that data set in particular, is that the ebopiprant drug was studied in addition to our add-on therapy to atosiban. We know in the U.S., atosiban is not approved, and so the regulatory and developmental strategy for ebopiprant in the U.S. has to be a little bit different because we don't have that standard of care. So there is an additional work that we need to do in the preclinical side to prepare us for the I&D pre-submission discussions with the FDA. There's some additional Phase I work that we want to do to make sure that we have the optimum dose, so we can get the best dose for use in this treatment population and then, we'll progress really rapidly to Phase IIa, IIb. So we're hoping to see the interim results in early 2024 and the complete results in late 2024 for the Phase IIa, IIb.

Okay.

But let me assure you that if we didn't get the signals in those studies in Europe that there was a path forward for this product, ebopiprant, we would have never in-licensed the product. So there's enough signals there that makes us feel that this is worth investigating.

I would imagine trials like this are pretty quick, right? Because you know right away whether -- or relatively soon whether the drug works, right? So either you avert the preterm labor or you don't, right? So how long would it take to do a Phase II trial in the U.S.?

Yes, you're absolutely right. The duration of the subject in the study itself is very short. The challenge for these studies is recruitment. And you can imagine we'll need a wide net of available sites because of just bringing in that treatment population, a woman who is experiencing that urgent preterm labor condition in the hospital at the time that we're there. So it's -- the trial is short in the sense of the actual delivery of the medication, but bringing people in the enrollment period can be quite extended.

Okay. And how free -- how common is the need to treat a preterm labor in, say, an academic medical center? Does that happen twice a day or twice a month?

Honestly, I don't have those numbers in front of me.

Okay. Okay, no problem. With that, I'll turn it to my colleague, Mike, to continue with some additional areas.

Steve, let's move to the postpartum hemorrhage, where Organon is deploying the Jada System you recently licensed. Can you describe first what is standard of care? And how does the Jada System fit into that landscape?

Sandy, do you want to take that on?

Sure. So the Jada System is -- again, it's in the treatment of postpartum hemorrhage, and there are options right now. We use tocolytics to help contract, uterine massage to help contract the uterus. And there's also other devices that are on the market, including balloons. The Jada device is a little bit different. It uses just common wall suction or a suction pump, and it has a soft silicon device. And instead of like a balloon that pushes up against the uterine wall to compress the arteries and stop the bleeding, this device actually uses suction to collapse the uterine wall and mimic the contractions that a healthy uterus or a normal uterus in postpartum condition would experience. And so it mimics the physiological experience that a woman would have without the postpartum hemorrhage. So that collapse helps constrict the arteries and decrease the amount of bleeding that a woman would experience.

Got it. And is that -- would that result in greater efficacy? Is there an advantage to that approach as opposed to...

So we haven't done the direct head-to-head comparison and -- but our experience so far and certainly, in the post-marketing setting, it is a rapid way to decrease the bleeding.

Got it. So you mentioned post-marketing. What does the market look like right now for Jada? How much penetration in the U.S.? And is it being used in ex-U.S. markets?

Well, the ex-U.S. markets, we haven't launched yet, but we expect to potentially either by the end of this year, Europe specifically or the beginning of next year. Right now, the uptake in the U.S., we had to stand up the sales force specifically dedicated to Jada, because it's obviously a different go-to-market model than the traditional therapeutic approach. And so far, the results that we've gotten have been very positive. So much so that we believe we will do significantly better than the business case was to actually acquire the company. So it's really going very well, and I can't wait to be able to show all of you, in terms of, as we start to kind of cross certain thresholds in our earnings calls, that you'll be able to see some of the growth that we are seeing, and we expect from Jada.

That's actually my next question. Should we expect maybe a breakout of Jada in the next quarter, the following quarter?, When might we see...

Matt, do you want to take that?

Yes. So we'll be disclosing this. So in our filings right now, we disclose revenue by product for all of our significant products. So once Jada reaches even some nominal level, you'll start to see it line itemized in the filings.

Great. Maybe, we can move to endometriosis, another area of interest for Organon. There have been some recent approvals in this indication. Again, maybe, Sandy, you could give us an overview of the current standard of care and where the current unmet medical need lies? And then, how might the Forendo agent that was recently in-licensed by Organon play into that?

Absolutely. So the current standard of care is a stepwise therapy between pain management, with everything from nonsteroidal anti-inflammatory, products to different forms of contraception or hormonal control of the endometriosis and the symptoms and the cycling to, as you mentioned, the recent approvals of some of the GnRH antagonists that are on the market at this point. The challenges with the GnRH antagonist right now is that it does place a woman in physiological menopause. And so they experience everything from bone mineral density loss to menopausal symptoms, including hot flashes. You also have to terminate those medications if the woman decides that she wants to start a family. And so that causes other complications and such during that period. We believe in the Forendo 6219 product, because it has a completely different mechanism instead of having that systemic intervention, and when you think about the systemic intervention, think about -- like a furnace system. When you turn on and off of furnace to regulate the entire house. Instead, what Forendo does with the hydroxysteroid dehydrogenase 17-B is it's -- we think it's locally acting. And so it'll locally act in the ovaries and basically, inhibit the activation, if you will, of a low activity estrogen into a high-activity estrogen. And it's that activation that causes the symptomatology and pathophysiology of endometriosis. And so we're studying the product to see if that local turning off and on of the low activity estrogen to the high activity estrogen will decrease the symptomatology in women suffering from this disease.

That's helpful. We have time for just another couple of product-related questions. I'm curious about polycystic ovarian syndrome, the Forendo acquisition came, brought another asset in-house that I believe is preclinical for this disease. Can you describe this syndrome? Give us a sense of its prevalence if you have those numbers, current standard of care and what the new asset might address?

Absolutely. Polycystic ovarian syndrome, I think, is a really underdiagnosed disease. And we know currently, it affects approximately 6% to 12% of the U.S. population, so about 5 million women in the United States right now. And the reason why I say it's underdiagnosed is that the syndrome itself can present in so many different ways. And what it is, is an excess production of androgen. And so it is -- and it's produced by essentially, in the brain, it's produced in the adrenal cortex, the adipose tissue as well as the ovaries. And the problem is it has multisystemic effects. And so women can present with diabetes, they can present with centripetal obesity and infertility. And it's just -- it's one of those diseases, I think that becomes overlooked, especially in healthcare, when it can be disjointed for women. And so they don't get diagnosed until later in life. And so as you mentioned, Forendo does have a preclinical asset and we're taking a look at it to bring it forward. And again, we expect this to be locally acting. So it would inhibit the enzyme that converts over to the androgen in the adipose tissue, the adrenal cortex and the ovaries. And so we're hoping that we would have a local effect that would decrease the systemic -- well, the local translation of the hyper androgen state into the woman's physiology.

So that's a huge number of people that have this syndrome. What percent of them are diagnosed and what percent of them are treated with anything? Or are there available for you?

So right now -- I mean, you treat the different syndromes that result from the hyper androgen stimulation. So diabetes, they get treated with antidiabetics, weight gain, anti-weight medicines. But it really is -- there's nothing specifically approved for polycystic ovarian syndrome. And so between hormone balances, the diabetic treatments, it's more symptomatology and disease-related, but not really focused on the center of the activity or preventing the further worsening of the syndrome.

So that, I guess, begs the question and how would you run a clinical program for something that does get at the root cause? Would you be looking at different symptom domains or how might -- what will be the path approval...

It's a great question. So I think it's going to take a combination of education and advocacy, really bringing in the KOLs, those world leaders that recognize the syndrome earlier. You would love to be able to educate physicians. How do you -- when you have a young woman with diabetes, do you need to look further than just the symptom itself or the trigger, if you will, the diabetes syndrome? And so I think it will be a combination of academic centers, KOLs, education. We don't have a diagnostic or biomarker as yet, but I do think that we'll have -- and I think the advocacy groups, right, bringing in women who've experienced or have this syndrome. It will take some activation to actually run those clinical studies.

Sandy, is it correct to say that it's much easier to diagnose polycystic ovary syndrome as opposed to endometriosis? Because on an ultrasound, you can actually see these pearls of cysts around the ovaries or...

Well, certainly, if that's how they present, right? And so I think it just takes an astute physician and whether or not they come into primary care because of their diabetic symptoms, because of their hair loss, because they're weight gain. I think these women tend to get shuffled through the healthcare system. Similar to endometriosis, where women takes 7 to 10 years to be diagnosed, I think with polycystic ovarian syndrome, you're looking at the same sort of journey that the women are having. And this really does affect women, can affect them in adolescence or early 20s and affect them for a lifetime. So it -- you're right, Kevin. But you can diagnose it in that sense, but not that early diagnostic trigger that we would be -- that would be the holy grail for both of the endometriosis and polycystic variant syndrome.

Well that's a very interesting future potential for business, is any biomarker marriage to products.

Absolutely.

Brainstorming session.

People will get -- they learn.

That's right. Certainly, a space to watch. I'll pass it back to Steve to...

So we have less than 1 minute and 2 questions remaining. So we'll have to keep this tight. But your business, given the very unfortunate situation in Eastern Europe, can you just quantify your business in Eastern Europe and you have clinical trials underway there?

Matt, do you want to take the financial aspect.

I can. Yes. So in terms of Russia and Ukraine together in 2021, that was approximately 2% of total revenues.

Okay.

And in terms of clinical studies, we don't have anything right now ongoing in the Eastern European theater in terms of overall clinical studies. But look, I mean, our philosophy right now, Steve, is that we're going to continue as long as we can to provide our medicines to both Russian patients as well as Ukrainian patients until it's impossible to do so. And so it is very volatile, as you know, fast-moving situation in terms of whether we can or can't. We're less focused on the financial aspects and more right now, this is turning into more of a humanitarian aspect, especially in Ukraine.

Right. And last question. We end every session with this question, and that is when you peer down the road 10 years, 10 years from today, what is the biggest surprise that you see -- or change that you see developing at Organon that perhaps, we on the outside, do not see now?

Well, I can address that from my perspective, from my vantage point, that I do think that in 10 years from now, there will be more companies that actually dive into the women's health space. Because I think that what's going to happen is that you're going to see more and more innovation in the space. You're going to see more and more opportunities that kind of emerge, I believe -- I strongly believe we'll be very successful because we've got the global reach, we've got a really strong business development acumen that we've developed very quickly. There are a lot of these assets that are just looking to be paired up with a company like ours. And I think what's going to happen in 10 years from now is that a lot of companies will probably say, why didn't we get into this a little earlier? And why did we kind of not focus on this, because everyone is focused on the 2 or 3 areas that you know better than I do. And a lot of them are striking out. And so ultimately, I think this is a good time to really focus on women's health only from the R&D and unmet need space.

I think that's a good point. We talked about 6 different kind of disease states and each one could be a 3-hour conversation. This is fascinating. I think there's a lot more going on at Organon than investors appreciate. So we appreciate your time to enlighten us and we wish you a productive rest of the day. So thank you so much.

Thank you.

Thank you with pleasure.